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Using bank level measures of competition and co-dependence, the authors show a robust positive relationship between bank competition and systemic stability. Whereas much of the extant literature has focused on the relationship between competition and the absolute level of risk of individual banks, they examine the correlation in the risk taking behavior of banks, hence systemic risk. They find that greater competition encourages banks to take on more diversified risks, making the banking system less fragile to shocks. Examining the impact of the institutional and regulatory environment on systemic stability shows that banking systems are more fragile in countries with weak supervision and private monitoring, with generous deposit insurance and greater government ownership of banks, and public policies that restrict competition. Furthermore, lack of competition has a greater adverse effect on systemic stability in countries with low levels of foreign ownership, weak investor protections, generous safety nets, and where the authorities provide limited guidance for bank asset diversification.

Access to Finance --- Bank competition --- Bank concentration --- Banks & Banking Reform --- Credit risk --- Debt Markets --- Default risk --- Distance to default --- Emerging Markets --- Finance and Financial Sector Development --- Financial Intermediation --- Lerner index --- Merton model --- Private Sector Development --- Systemic risk

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The Austrian authorities introduced new supervisory guidance aiming at constraining the funding model of the three largest Austrian banks’ subsidiaries. The guidance introduced the concept of Loan-to-Local-Stable-Funding Ratio (LLSFR) as a monitoring tool of business model sustainability. Austrian banks’ subsidiaries have a significant market share in several Central, Eastern and South Eastern Europe (CESEE) countries. Evidence for CESEE banks suggests that the LLSFR is an appropriate tool to monitor the possible buildup of credit risk besides its more obvious role as an indicator of liquidity risk.

Banks and banking --- E-books --- Finance --- Business & Economics --- Banking --- Credit --- Borrowing --- Money --- Loans --- Banks and Banking --- Industries: Financial Services --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Financial Institutions and Services: Government Policy and Regulation --- Financial services law & regulation --- Credit risk --- Loan loss provisions --- Commercial banks --- Financial regulation and supervision --- Financial institutions --- Liquidity risk --- Financial risk management --- State supervision --- Austria

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Australia has a very high level of compliance with the Basel Core Principles for Effective Banking Supervision (BCPs). The Australian banking system was more sheltered than a number of other countries and weathered the Global Financial Crisis relatively well. This was in part due to relative concentration of the system on a well performing domestic economy, but also due to a material contribution from a well-developed regulatory and supervisory structure. Notable strengths of the Australian supervisory approach rest in its strong risk analysis and on the focus of the responsibility of the Board. The Australian banking system however, is still vulnerable to continuing aftershocks of the financial crisis not least as banks? funding profiles could be a conduit of instability.

Banks and banking --- Agricultural banks --- Banking --- Banking industry --- Commercial banks --- Depository institutions --- Finance --- Financial institutions --- Money --- State supervision --- Banks and Banking --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Financial Institutions and Services: Government Policy and Regulation --- Financial services law & regulation --- Capital adequacy requirements --- Credit risk --- Market risk --- Operational risk --- Financial regulation and supervision --- Liquidity risk --- Financial risk management --- Asset requirements --- Australia

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We analyze factors driving persistently higher financial intermediation costs in low-income countries (LICs) relative to emerging market (EMs) country comparators. Using the net interest margin as a proxy for financial intermediation costs at the bank level, we find that within LICs a substantial part of the variation in interest margins can be explained by bank-specific factors: margins tend to increase with higher riskiness of credit portfolio, lower bank capitalization, and smaller bank size. Overall, we find that concentrated market structures and lack of competition in LICs banking systems and institutional weaknesses constitute the key impediments preventing financial intermediation costs from declining. Our results provide strong evidence that policies aimed at fostering banking competition and strengthening institutional frameworks can reduce intermediation costs in LICs.

Finance --- Business & Economics --- International Finance --- Intermediation (Finance) --- Econometric models. --- Financial intermediation --- Banks and Banking --- Finance: General --- Money and Monetary Policy --- Inflation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Monetary Policy --- General Financial Markets: General (includes Measurement and Data) --- Price Level --- Deflation --- Banking --- Financial services law & regulation --- Monetary economics --- Macroeconomics --- Credit risk --- Reserve requirements --- Loan loss provisions --- Competition --- Financial regulation and supervision --- Monetary policy --- Prices --- Financial markets --- Banks and banking --- Financial risk management --- State supervision --- Ghana

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This report is a detailed assessment of Brazil’s compliance with the Basel Core Principles. Brazil has a well-defined banking supervision process that grants the Banco Central do Brasil (BCB) broad enforcement powers to carry out corrective actions. The licensing process has been enhanced, and considerable improvements have been implemented with regards to debt collection by the BCB. The authorities have adopted strategies to improve compliance measures. Corrective and remedial powers of supervisors have been streamlined. Consultations are under way for implementing Basel-III.

Banks and banking --- Agricultural banks --- Banking --- Banking industry --- Commercial banks --- Depository institutions --- Finance --- Financial institutions --- Money --- State supervision --- Banks and Banking --- Public Finance --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Taxation, Subsidies, and Revenue: General --- General Financial Markets: Government Policy and Regulation --- Financial services law & regulation --- Public finance & taxation --- Banking law --- Market risk --- Credit risk --- Operational risk --- Internal controls --- Financial regulation and supervision --- Bank legislation --- Revenue administration --- Financial risk management --- Revenue --- Financial services industry --- Law and legislation --- Brazil